Temporary injunction throws wrench in agencies' overtime plans

U.S. companies, including marketing and PR agencies, were planning to implement new overtime policies by December 1, but a preliminary injunction granted by a federal judge on Tuesday added another layer of uncertainty.

NEW YORK: Agencies should hit pause, but not reset, on implementing revised personnel policies after a federal judge approved a temporary injunction stopping federal overtime rules from going into effect next Thursday, experts said.

A federal judge on Tuesday granted a motion filed by the U.S. Chamber of Commerce, 21 states, and a handful of business groups claiming the Labor Department overstepped its bounds in issuing new overtime rules. The decision by U.S. District Judge Amos Mazzant at least temporarily stops the federal government from requiring businesses pay overtime to workers whose salaries fall below a threshold of $47,500 when they work more than 40 hours a week.

Mazzant hinted the rule could be struck down permanently, saying plaintiffs in the case "have shown a likelihood of success on the merits."

However, legal experts said Wednesday that it is too soon for agencies to throw out their plans for complying with the law. While Mazzant’s temporary ruling could become permanent, it is also possible that the Labor Department could appeal and overturn the temporary injunction by Inauguration Day, though almost certainly not by the original deadline of December 1.

"The president-elect has suggested he believes the rule was unfair, and he might change or do away with the law," said Jessica Golden Cortes, a partner in Davis & Gilbert’s labor and employment practice group. "Looming over all of this is that a lot can change once the new administration takes over."

The law firm urged clients to prepare for several outcomes in a memo issued Wednesday, noting that an appeal from the Labor Department is likely.

Set to go into effect on December 1, the regulation would have marked the first time in a dozen years the benchmark under which overtime pay is mandated was raised.

Before the judge’s decision, agency leaders said they were planning to comply with the regulations by reducing their junior-level staffing, offering fewer travel opportunities, raising clients’ fees, and scaling back non-salary benefits. Others planned to bump up salaries to meet the threshold, especially firms in large markets such as New York, San Francisco, and Washington, DC.

"I would like to reiterate that [agencies] should take this moment to pause and make sure they are comfortable with their plans moving forward," said Sara Ghazaii, VP and director of communications at the PR Council. "It’s something that needs to stay top-of-mind for everyone."

No one-size-fits-all approach There’s no silver bullet for firms to tackle the pay-rule changes, if they go into effect, with factors including agency specialty and geographic location playing a large role, experts warned. For instance, firms in large cities in the Northeast and the Bay Area are likely to have more employees above the overtime threshold, as are those with specialties such as corporate communications.

Agencies should also be careful not to overlook state regulations, said Michael Lasky, Davis & Gilbert partner and chair of the firm’s public relations law practice. He noted New York has a higher financial threshold exempting staffers from overtime than the current federal standard, and that number could go up yearly if proposed legislation is passed. California law also requires businesses with more than 25 employees to pay staffers $43,680 as of the start of next year to exempt them from overtime laws.